Tesla shares fell 7% in premarket trading on Thursday after the company’s CEO, Elon Musk, warned that sales growth will slow this year despite price cuts that have already hurt margins and growing investor concerns about the world’s most valuable automaker.
Musk said growth will be “noticeably lower” as Tesla is focusing on a next-generation electric vehicle to be produced at its Texas factory in the second half of 2025, which is expected to trigger the next delivery boom.
But his comments did not please investors, with Tesla set to lose around $50 billion in market value if premarket losses hold. Its shares have already fallen 16.4% this month to the latest close.
“Tesla’s headlines essentially went from bad to worse,” analysts at TD Cowen said, noting that fourth-quarter revenues and profits also fell short of expectations.
Shares of other electric vehicle makers such as Rivian, Grupo Lúcido and Fisker also fell.
The electric vehicle industry has been grappling with slowing demand for more than a year, and Tesla’s price cuts will likely worsen the pressure on startups and automakers like Ford.
“The problem for Tesla is that any significant attempt to increase sales in the future will likely have to be achieved at the price of further declines in operating margin, due to competition with BYD in China, as well as increased competition elsewhere,” said Michael Hewson , chief market analyst at CMC Markets.
According to LSEG data, the company’s shares are trading at nearly 60 times 12-month forward earnings estimates. That gives it a more premium valuation than other stocks in the so-called “Magnificent Seven” group, made up of Apple, Microsoft, Alphabet, Amazon, Nvidia and Meta Platforms, as well as Tesla.
Some analysts said the current valuation could be difficult to justify if Tesla’s sales growth and margin weaken further.
“Tesla increasingly resembles a traditional car company,” said Toni Sacconaghi, an analyst at Bernstein.
Source: Terra
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